Middle Class America & Affordable Insurance: The Premium Tax Credit

Since providers of the ACA-compliant health insurance many Americans have received are busy working on e-filing their IRS-required ACA return before June 30, ExpressIRSForms is here to give some more information to the individual taxpayers required to obtain affordable health insurance.

The premium tax credit was introduced by the IRS in January of this year. It’s meant to give middle-class Americans tax benefits which will help make it easier to find and purchase affordable health insurance.

Premium Tax Credit Eligibility
In order to be eligible for a premium tax credit:

• Your household income has to be at least 100% the federal poverty line (FPL), without exceeding 400% of that line.
• You’ll need to file a joint income tax return if you’re married, with certain exceptions for victims of domestic violence and spousal abandonment.
• You must be enrolled in a “qualified health plan” through an Affordable Insurance Exchange.

If someone else is able to claim you as a dependent, you’re not eligible for the premium tax credit. You’re also not eligible if you are eligible for other qualifying coverage, like Medicare, Medicaid, or employer-sponsored coverage.

How Much is the Tax Credit?
Your premium tax credit amount will generally be equal to the difference between the premium for the “benchmark plan” and your “expected contribution.”

• Your expected contribution is a specified percentage of your household income. For the tax year 2015, this percentage ranges from 2.01% of income (families at 100% of the FPL) to 9.56% of income (families at 400%). 
• A benchmark plan is a plan that is the second-lowest-cost plan. The plan must also cover your family at the “silver” level of coverage.

Keep in mind that this credit is capped at the premium for the plan the family chooses, so no one will receive a credit that is larger than the amount they pay for their plan.

Important Premium Tax Facts

• The premium tax credit actually applies to a broad range of middle-class families: the income range of 100% to 400% of the FPL roughly translates to apply to families of four who made between $23,850 to $94,400 in 2015 and $24,250 to $97,000 in 2016.
• Older Americans who face higher premiums because they’re not yet eligible for Medicare will receive a larger tax credit since the amount of the credit is directly tied to the amount of the premium.
• The premium tax credit is fully refundable, and advance credit payments are made by the Department of the Treasury directly to the insurance company to help with the cost of monthly premiums.

CPAs, service providers, and applicable large employers who still need to e-file their ACA return with the IRS can do so quickly and easily through their ExpressIRSForms account! If you have any questions about getting started, just give us a call at (704) 684-4751 or send us an email to support@ExpressIRSForms.com.